Magellan Health of Avon Reports 21 Percent Drop In Quarterly Earnings

Magellan Health Services Inc. of Avon reported a 21 drop in second-quarter earnings Friday due partly to the rising cost of caring for patients with behavioral health problems and in its radiology and pharmaceutical business segments.

Net income dropped to $27 million, or 97 cents per diluted share, during the three-month period ending June 30, compared with $34.2 million, or $1.07 per diluted share, during the same period last year.

Analysts polled by Thomson Reuters were expecting the company to report 91 cents per share.

The financial-reporting site dealreporter.com had an article last week citing anonymous sources that Magellan has been working for months with Credit Suisse "exploring strategic alternatives," including a possible sale. The company has said it does not comment on market rumors or speculation.

Magellan employs 70 at its office on Nod Road and has about 5,000 workers nationwide.

Magellan reported a 15 percent jump in revenue to $805 million during the quarter from $698 million during the same period last year. The company saw growth in sales related to its employer-based commercial customers, government entities and in both radiology and specialty pharmaceuticals. It had a decline in sales for Medicaid administration, a key sector in the future as Medicaid rolls expand with federal health care reform.

The specialty health-care management company does business with health plans, employers and government agencies. Magellan manages behavioral health for about 33.7 million people, radiology for about 17.1 million people and pharmaceutical management for about 7 million.

"We are reaffirming our guidance for 2012, which reflects net revenue in the range of $3.2 billion to $3.4 billion, and net income in the range of $91 million to $109 million, translating into diluted earnings per share in the range of $3.25 to $3.89," said Chief Financial Officer Jonathan N. Rubin. "Additionally, we continue to expect segment profit for 2012 to be in the range of $240 million to $260 million, and unrestricted cash and investments to increase between $91 million and $136 million. Our guidance does not assume the impact of any future share repurchases."

Magellan shares were trading at $54.75, up 51 cents, in late morning trading Friday.